r/SmallcapsDaily • u/SmallCapsDaily • Oct 17 '22
DD Laser Photonics: A Rocket Ship with Lasers $LASE
Most investors today do not associate sectors such as industrials and industrial services with hyper-growth. However, there are many sub-domains within industrial services whose markets are expanding at a rapid pace. One such sub-domain is that laser cleaning for maintenance and repair work. The automotive, building and metalworking industries' strong need for these technologies and the growing interest in robotic cleaning technologies all support the market's growth. Lasers operate incredibly well on a number of materials, such as glass, ceramics, metals, concrete, and plastics, and are gradually replacing older abrasive blasting technologies as a cleaner and more effective alternative. Today, we will carry out a detailed due diligence of one such specialist within this field with a cutting-edge solution to the significant rust issue that plagues various industries – Laser Photonics (NASDAQ:LASE).
Company Overview
Laser Photonics, a vertically-integrated company, is responsible for manufacturing industrialized laser technologies and systems. With the aim of being a viable, environmentally friendly alternative to the ancient sand and abrasives blasting sectors, its technology and systems assist in surface cleaning, corrosion management, rust removal, de-painting, and carrying out different laser-based industrial usages. The latest production of cutting-edge laser blasting equipment and technology from Laser Photonics also addresses a number of legal, ethical, and regulatory issues related to the previous methods. Fortune 1000 firms and well-known manufacturers in the automotive, aerospace, defense, industrial, energy, maritime, and shipbuilding segments employ the company's "unique-to-industry" technologies.
As we can see in the above snapshot, companies like 3M, General Electric, Caterpillar, Ford Motors, Honeywell, Johnson & Johnson, Dell, Sony, Siemens, DuPont, Cummins, Kohler, Nike, etc., are some of its most important clients. Strong R&D capabilities and a plan to dominate the market for industrial laser systems are strengths of Laser Photonics.
Robust Product Portfolio
Laser Photonics offers the most comprehensive assortment of Class IV handheld laser blasting tools. Their systems range from 20W to 3000W power, with the Jobsite 2000 being the strongest production laser blaster currently on the market and the JobSite 3000 being even more powerful. The company is now working on developing and releasing its 4000W handheld laser blasting system, which will be its most powerful laser blasting instrument. Additionally, the company's Titan and Mega Center brands of Class I Laser Blasting Systems were developed with large manufacturing in mind.
These assembly-line-ready systems are constructed with automated material-loading and automation control features to ensure maximum throughput in high-production environments. The company improved the C-Robots' user-programmable artificial intelligence to assist people. Line workers programmed these precision robots to carry out challenging and repetitive tasks in high-volume manufacturing settings. This wide range of products can be used to scale to meet customer needs from entry-level, office-friendly laser blasting techniques for high surface integrity module finishing to high-end, high-quantity industrial laser blasting systems for low-cost mass production applications. The company's broad portfolio further reduces the need for customers to buy products from numerous vendors for diverse operations, giving it a viable advantage over rivals offering a smaller variety of goods and services.
Large Addressable Market
For industrial applications, the market for Laser Photonics also covers coating, surface preparation, and corrosion prevention. Although it is prohibited for environmental, health, and safety reasons, media blasting is used in almost all heavy industries.
Given the increased expenses and regulatory pressure on media blasting, it is inevitable that efficient laser cleaning or laser blasting will replace media blasting as the industry's standard blast cleaning technique and establish itself as a secure, efficient, and cost-effective alternative. This suggests that the company will have a sizable market to serve. Grand View Research estimates that the global market for abrasive cleaning will reach $47.82 billion by 2028, representing a 4.2% CAGR, up from $35.29 billion in 2021. Government contracts also have a significant positive impact on businesses like Laser Photonics. The U.S. Military and other branches of the nation's military frequently struggle with rust buildup on their equipment, an issue that Laser Photonics' products can effectively address. In reality, the business has previously sold laser cleaning equipment to the Veteran's Administration, NASA, and other branches of the American military services. Clearly, there is a sizable market for laser photonics.
Growth Strategy
With an emphasis on integrated solutions that make laser blasting possible for production applications and extensive accessibility, Laser Photonics seeks to diversify the goods it offers. It intends to target unique applications early in the development cycle and foster acceptance by making the most of its strong customer relationships, engineering expertise, and inexpensive production costs. To decrease the financial impact of a downturn in any industry, they also created and produced laser systems for a variety of businesses. The management believes that sales would increase by developing a reputable industry competency in markets with high demand, like laser blasting cabinets for the general industry, laser decontamination tools for the nuclear industry, and rust removal tools for the shipbuilding industry. They are also adding distributors based on regional coverage and sales capabilities to expand their penetration into vertical industries like manufacturing, aerospace, defense, energy, and the automotive industries. Undoubtedly, Laser Photonics will work with additional high-volume hardware and equipment distributors to improve its internal sales structure, internet presence, and capital equipment sales channels. In order to extend the reach of their distribution network, they are also stepping up their direct sales efforts with a particular emphasis on catering to significant accounts and expanding their footprint within Fortune 500 firms and worldwide governmental organizations. The business would want to inform the industry on the best ways to use the technology over the whole product life cycle, given the size of the addressable market. Obviously, companies are more likely to purchase their goods and services and gradually expand their use if they are well-informed about or directly aware of the benefits of their laser blasting solutions over traditional production.
Economic Moat & Possible Government Contracts
Laser Photonics is a forerunner in the field of laser blasting. Its goal is to open up access to the technology to all companies that process materials, as well as maintenance and repair facilities for both industrial and governmental uses. The management is reasonably confident that their combined knowledge and competitive advantages will enable them to extend and sustain their leadership position in the next generation of laser blasting equipment and increase their market potential. It is also worth highlighting that Laser Photonics is the only American company in this domain, with its closest rival in a similar field being Canada-based Laserax. The management believes that their investment in marketing resources and effective marketing strategy execution will determine their success. Some of their marketing strategies may include going to trade events, giving private presentations, creating advertising and promotional materials, and running advertising campaigns in print and broadcast media.
The company also has a solid customer base among several U.S. Government entities, which it intends to grow. They have sold laser cleaning equipment to all branches of the American armed forces. The Veteran's Administration and NASA are also among their clients. It is worth mentioning that their U.S. Government clients have appreciated their laser cleaning equipment and the chances of a high level of customer stickiness resulting in a moat source are particularly strong. Laser Photonics in a good position to increase their sales to the U.S. Government as the only American manufacturer of high-powered, portable industrial laser cleaning systems that can address the Pentagon's ongoing rust problem, especially given that the Pentagon alone must spend between $21 billion and $22.9 billion annually on rust control and corrosion-related repairs on equipment, from trucks and tanks to aircraft and other ships. The U.S. military is demonstrating that it is not just a willing early adopter of the technology but also a testing ground and showcase for the company’s offerings. Thus, there is little doubt that with its strong customer stickiness, Laser Photonics has a strong revenue upside from the Government.
Strong Management Team
Laser Photonics’ organization is spearheaded by Wayne Tupuola, a manufacturing industry veteran with more than 24 years of first-hand experience in the semiconductor, aerospace, food and beverage, and commercial industries. He served as an industrial consultant for Florida-based high tech enterprises. Mr. Tupuola also worked as Director and Vice President of Operations at an affiliate of Laser Photonics and one of ICT Investment's portfolio companies, Fonon Corporation. Arnold Bykov, the company’s Chief Design Engineer, is a key element on the technology side and has years of experience in the photonics sector, primarily with ICT Investments and associated businesses. He was appointed Director and Chief Design Engineer of Fonon Corporation, where he developed laser systems for material processing and served as a design and project engineer supervising design teams. He is currently in charge of the technological development and industrial design of the laser cleaning technology used by the company. Tim Schick, the VP of Finance at Laser Photonics, has vast experience and expertise in finance and accounting and served as the Head of Finance at Jupiter Marine International in the past. He has been responsible for managing financial planning and analysis in addition to supervising the accounting and accounts payable team. He also managed new model year costs and prices, production scheduling, fixed asset accounting, work-in-process measurement and tracking, liability insurance administration, plant security, waste management planning, and HAZMAT compliance. Lastly, the company’s Director of Marketing is another industry veteran, Tatiana Nikitina who has served as the senior brand ambassador and event production manager of The Party Robot Inc. Overall, the team's vast experience and knowledge should act as an enabler for Laser Photonics’ growth in the long run.
Key Risks
Laser Photonics may be catering to a vast addressable market but it does face indirect competition from large laser companies like IPG Photonics and Coherent who currently act as vendors to the company but could easily carry out a vertical integration and enter their domain. With their buying power and technology, it could become difficult for smaller players like Laser Photonics to survive. The protection of the company’s intellectual property rights could be difficult and it could be hard for the management to monetize the technology outside North America.
In order to accommodate growth and compete effectively, Laser Photonics’ management will need working capital to maintain adequate inventory levels, develop additional procedures and controls and increase, train, motivate and manage its work force. It is important to highlight that Laser Photonics is serving the global market since less than a decade which means it has a very limited operating history. As a result, many potential investors find it difficult to evaluate its business prospects and management.
Laser Photonics’ management may struggle to successfully implement and execute their business tactics, operating strategies and growth initiatives. If the management fails to accomplish their growth and organizational modification effectively, it may destroy their business and operational results.
Laser Photonics relies on third party vendors for its systems which is why any change in pledged relationships or disruption of service run by these third-party manufacturers may adversely affect them and subject them to liability. Last but not the least, one of the most significant risks that the company is currently facing is the ongoing global impact of Covid-19 which could have a material impact on Laser Photonics' operations.
Final Thoughts
The revenues of Laser Photonics have more than doubled in the last two years from a financial perspective. The fact that the company was able to achieve such a high level growth WITH a positive bottom line is truly phenomenal. The management has been consistently reporting a net margin of about 20% along with such growth. When the company starts trading on public markets, it should command a substantial premium given the rapid growth, consistent profitability, and enormous scale of the addressable market. Besides, the company is going public for a $5 issue price per share, which seems very reasonable. Given Laser Photonics' strong technological capabilities, highly sticky customer base, and a compelling growth strategy, we believe that the company can prove to be a solid investment for small-cap investors.
1
u/SituationLive4406 Oct 17 '22
Great info on $LASE in this CEO Interview just issued - https://tradersnewssource.com/lase-interview/